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Senate passes financial bailout 75-24

[Update: 2 hours after the Senate passed the bailout bill by a wide margin, S&P 500 stock index futures are down 12 points, or a little more than 1%, roughly the equivalent of 120 points in the Dow Jones Industrial Average. I was suggesting, and I emphasize this is just a theory, that part of the reason the market recovered much of Monday's loss on Tuesday could have been due to the belief that a Paulson-plan-like bailout might not pass. Anyone with any common sense realizes that this plan is likely to cause massive problems, not least with moral hazard, in the future. After all, what's next, bailing out credit card companies or auto finance companies?]

At about 9:20 PM Eastern Time on Wednesday, the U.S. Senate passed the "Financial Markets Bill" by an overwhelming vote of 74-25 , including yes votes from some conservative Republicans such as John Cornyn, Richard Burr, and Tom Coburn. Both Senators McCain and Obama voted for the measure, as expected. The vote eliminates the possibility of filibuster, although that was very unlikely in any case.

It will be very interesting to see what happens in the House. My guess is that the turn of the tide in the Senate presages a similar thing in the House, much to my dismay. The key will be for the House to demand an immediate suspension of mark-to-market rules and to ensure it survives a conference. After that happens, I believe the Treasury won't even be able to spend the $250 billion initially authorized to be spent on distressed assets because banks won't want to sell once they can keep them on their balance sheets at more reasonable prices.